Several weeks ago, I wrote about
San Diego-based Brandes Investment Partners L.P. and their decision to
step down from managing mutual funds for AGF Funds Inc. to set up a
competing firm. AGF immediately launched an extensive search for a
management firm capable of filling Brandes' big shoes. This week, the
big announcement was made and I must admit that I was pleasantly
surprised.

Background

AGF poured a lot of marketing energy into pumping the Brandes name,
philosophy, and rock solid style. Marketing power plus great returns
resulted in lots of new money invested in AGF's funds. Many times
during the past eighteen months, it was the only reason AGF was
receiving new money on a net basis, as a firm. So the temptation to
grab a big name manager with lots of marketing appeal was huge.

When AGF began its search, it also hinted strongly at the likelihood
of appointing more than one manager to the AGF International Value
(and its RSP clone) to reduce their "dependence" on any one management
firm. However, they didn't get a big name and only one management firm
was appointed to lead their flagship global fund.

Harris Associates L.P.

AGF named Harris Associates L.P. of Chicago (no connection to Bank of
Montreal's Chicago-based Harris Bank subsidiary) as the new manager on
the AGF International Value and its RSP clone. Harris has been in business for about a
quarter-century, but is not well known in Canada.

They manage money for wealthy individuals and other institutions, like
charities, foundations, and pension plans. They also offer their
expertise to smaller U.S. investors through a no-load family of mutual
funds baring the name Oakmark.

My first impression is that AGF has made a fine selection. Recall that
20/20 Funds Inc. (now AGF) originally found Brandes back in 1994 when
it was a relative unknown in the Canadian industry. I think they've
done a good job of finding a manager that nicely embodies the value
philosophy to which unitholders of the AGF Int'l Value have grown
accustomed.

(Recall that a 'value' stock-picking style focuses on buying stocks at
bargain basement prices - doing all possible not to overpay.)

While no two firms manage money in identical fashion, the research
I've done so far indicates that unitholders who remain with AGF
International Value should be well rewarded with a similarly "stingy"
value style.

While Harris and Brandes each value stocks using somewhat different
methodologies, each tends to hold a fairly concentrated portfolio;
each has a deep team of analysts to support portfolio managers; and
neither is afraid to follow bad news to find an investment
opportunity. That said, there are definite differences, but I'd guess
they're not different enough for most people to notice.

I am comforted by the fact that AGF resisted the urge to spread the
money too thinly (among two or three managers) or to get a big name
with greater marketing value than Harris. Their move indicates a
greater concern for doing the best thing for investors rather than
pleasing their marketing department. Ironically, choosing a smaller
firm may have given them more leverage to include exclusivity and
non-competition clauses in the management agreement - which should
squash any fears of a repeat of a "Brandes-type bomb" in the future.

In scanning the list of stocks in both manager's portfolios, they're
very different - only 1 in common. (That's based on a comparison of
Oakmark Global as of September 30, 2001 and AGF International Value as
of December 31, 2001.)

However, Harris has indicated a keen sensitivity to taxable
investors. And it's worth noting that for more than a year,
U.S. mutual funds have been mandated by the SEC to report both pre-tax
and after-tax returns. I would expect a fair amount of turnover in the
beginning, with a more gradual transition subsequently to better
conform to Harris' top picks.

Other manager appointments

Lost in this big announcement were two other appointments. Brandes is
also responsible for AGF International Stock (an overseas stock fund)
and AGF Emerging Markets Value funds. Interestingly, AGF announced
that sub-teams within their own AGF International Advisors would
assume responsibility for both funds. While I'm doubtful that they'd
be the best choices (of all firms available globally), I think the
choices are quite good.

John Arnold and Rory Flynn will take over the AGF International Stock
fund. The team has done a great job with AGF European Equity using a
value style. Since Europe makes up 70 per cent of all stock markets
outside of North America, I'd say this fund is in good hands.

As for Patricia Perez-Coutts' appointment to the Emerging Markets
Value fund - it's a good move. Recall that she was the lead manager
for Trimark Americas fund, which had a unique mandate to invest in U.S
and Latin American mid-cap stocks. So, emerging markets are familiar
ground for Ms. Perez-Coutts. She has managed AGF Latin America since
October 18, 2001.

Recommendation

Whenever such a fundamental change in money managers takes place, it's
sometimes a challenge to evaluate the change and make a call. I'm
still doing more research on these recent changes announced by AGF,
particularly on Harris Associates. However, I feel quite confident in
vsaying that unitholders of all of the affected funds should resist the
urge to sell. This is particularly true of those invested on a
deferred sales charge (DSC) basis; or those sitting on big unrealized
gains on these funds in taxable ac counts.

For loyal Brandes followers, the new firm and funds should be
available in a few months.

Dan Hallett, CFA, CFP is the President of Dan Hallett & Associates Inc. in
Windsor Ontario. DH&A is registered as Investment Counsel in Ontario and
provides independent investment research to financial advisors. He can be
reached at dha@danhallett.com

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